What is Your Private Key All About?

Remember how we always tell you about the importance of owning your private keys? This phrase sounds almost like a cliche already, and technically those are just mere words unless you actually understand the meaning that lies beneath them. A private key is one of the fundamental elements of cryptography, a science that uses a set of techniques which allow exchanging private messages in the presence of, but without interference from, third parties.

A lot of people use cryptography on a daily basis without even realizing it. Because of cryptography, your private messages on Telegram or Whatsapp stay private and your digital assets do not mysteriously disappear overnight. The whole blockchain existence is based on cryptography and it wouldn’t hurt to understand the very basics of it.

Cryptography has been around for quite a while. For instance, the Romans used to encrypt their military messages by replacing the letters in a certain sequence, but since then the techniques have got a lot more complicated.

There are two types of encryption: symmetric and asymmetric.

Symmetric encryption uses passwords or passphrases to unlock sensitive information, however, this technique is clearly not ideal for sharing this information with somebody else, because you have to find a secure way to send your password to the right person.

Asymmetric encryption uses two types of keys to pass and protect what you’re sending. Your public key acts as an address that all interested parties are well aware of. Your private key (basically, it’s just a very long number) is a tool that you use to unlock your ‘mailbox’ and grab what others have sent you.

Today we use end-to-end encryption to make sure that we can exchange information in a way that is safe and non accessible to a stranger. When we communicate with each other on the internet, the messages are first sent to a server and then to the receiving side. However, the server is not immune and hackers or even governments can use this info for their own interests. End-to-end encryption is a solution to this problem. The server receives encrypted messages, not just plain text. These messages are encrypted in a the way that only a specific person who owns the private key will be able to read them.

But how does it work in practice?

Let’s say you want to send an encrypted message to your friend. First, you and your friend generate two sets of keys on your devices: private and public ones that are mathematically linked to each other. The public key is responsible for encrypting the data, and the private one for decrypting it. The public key can be freely shared with anyone because there’s no way for a third party to get any access to any of the sensitive info just by using this public key. In order to send a message, you and your friend exchange your public keys (addresses) with each other, and you use your friend’s public key to encrypt the message. This way nobody (even you) but your friend is able to decrypt this special message that was created specifically for this particular person.

It is important to understand that such actions are irreversible and you cannot cancel the transaction.

That’s why it is so important to keep your private keys safe.

Cryptocurrencies use asymmetric encryption to protect the identity of the owners of the funds, the funds themselves, and to make sure that transactions are executed securely. It is also called public key cryptography.

Now let’s figure out what the transaction process looks like.

If you want to send your friend one Ether, you are going to use your crypto wallet (Lumi Wallet is a very safe one to use, by the way). The device where your wallet is installed does not technically store your funds, as they are not physical, but it does store the private key. But this key can never leave your device.

So when you send your friend 1 ETH, you need to access your private key on your, let’s say phone, to sign the transaction or, in other words, give permission to make an action. This transaction contains information about the amount and the sender, and your public key confirms that it came from your wallet.

If you lose your device, your money is not going anywhere, just like with your credit card. But because there is no bank, you cannot just call anywhere to recover it. What you can do is get a new device, install a wallet, and use your private key or mnemonic to get access to your funds again.

And that’s another reason to keep your private keys safe and write down your mnemonic.

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